Slide 7.
CHAPTER 7
E-PROCUREMENT
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 7.2
Learning outcomes
Identify the benefits and risks of
e-procurement
Analyze procurement methods to evaluate cost
savings
Assess different options for integration of
organizations’ information systems with
e-procurement suppliers.
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 7.3
Management issues
What benefits and risks are associated with
e-procurement?
Which method(s) of e-procurement should we
adopt?
What organizational and technical issues are
involved in introducing e-procurement?
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 7.4
How important is procurement?
We estimate that for every dollar a company earns in
revenue, 50 cents to 55 cents is spent on indirect
goods and services – things like office supplies and
computer equipment.
That half dollar represents an opportunity: By
driving costs out of the purchasing process,
companies can increase profits without having to sell
more goods. Hildebrand (2002)
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 7.5
What is e-procurement?
Procurement refers to all activities involved with
obtaning items from a supplier
The electronic integration and management of all
procurement activities including purchase request,
authorization, ordering, delivery and payment
between a purchaser and a supplier
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 7.6
The 5 rights of E-procurement
Sourcing items:
at the right price
delivered at the right time
are of the right quality
of the right quantity
from the right source.
Baily et al., 1994
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Figure 7.1 Key procurement activities within an organization
Figure 7.2 Electronic procurement system
Source: Tranmit plc
Slide 7.9
Types of procurement
Production-related procurement
Relate to manufacturing of products
Non-production related procurement
Supports operation of whole business
How items are bought:
Systematic sourcing
Negotiated contracts with regular suppliers
Spot sourcing
Fulfillment of an immediate need
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 7.10
Drivers of e-procurement
Reduced purchasing cycle and cost
Enhanced budgetary control
Elimination of administrative errors
Increasing buyer’s productivity
Improving information management
Improving the payment process
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 7.11
Risks and impact of e-procurement
Organizational risks
Need to redeploy staff: purchasing team of 5 people
was reduced to 4
Maverisk/off-contract purchasing: unnecessary items
are ordered
Technology risks
Integration with existing financial systems
Failure to achieve real cost reduction
ROI (return of investment) may be lower than
forecast
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 7.12
Implementing e-procurement
Stock control system
CD/web-based catalogue
E-mail/workflow system
Order-entry on web site
Accounting systems
ERP systems
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Use of different information systems for different aspects of the
Figure 7.3
fulfilment cycle
Figure 7.4 E-mail notification of requisition approval
Source: Tranmit plc
Document management software for reconciling supplier invoice with
Figure 7.5
purchase order data
Source: Tranmit plc
Figure 7.6 The three main e-procurement model alternatives for buyers
Table 7.6 Assessment of the procurement model alternatives for buyers
Figure 7.7 Integration between e-procurement systems and catalogue data
Figure 7.8 An online catalogue of items for purchase
Source: Tranmit plc
Figure 7.9 Ford supplier portal provided by Covisint
Source: [Link]
Figure 7.10 Supplier Route to Government Portal ([Link])
Slide 7.22
Government marketplace
exchanges
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Types of marketplace
Types of B2B marketplaces identified by Kaplan and Sawhney (2000)
Table 7.7
with examples
Source: Adapted and reprinted by permission of Harvard Business Review from table on p. 99 from ‘E-hubs: the new B2B marketplaces,’ by Kaplan, S. and Sawhney, M., in Harvard
Business Review, May–June 2000. Copyright © 2000 by the Harvard Business School Publishing Corporation, all rights reserved
Slide 7.24
Questions:
Q1) Describe the different elements of an e
procurement systems
Q2) Outline the main benefits and risk of e-
procurement
Q3) Explain how cost saving may arise from e-
procurement
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
